Budget 2012: The IFS’s devastating picture that shows we’re not all in it together

The IFS carried out their customary budget analysis (pdf) today. In among the slides was the chart below, which shows the regressive nature of not only this budget but the totality of tax and benefit changes implemented by the Coalition.

See Chart:

The blue line shows how, with the exception of the richest 10 per cent, the tax changes announced yesterday will benefit those further up the income distribution. Forthcoming analysis by IPPR’s Kayte Lawton breaks down the impact of the tax threshold change in greater detail.

The purple line shows the impact of all changes implemented by the coalition. This includes freezes to tax credits, cuts to support for childcare for low earners, and the switch to CPI for uprating benefits. It clearly shows that even the richest 10 per cent have done better under this government than the poorest 40 per cent of households.

The group that have done least badly are those earning more than 80 per cent of the rest of the population. These are families with a combined annual disposable income of around £35,000 (ie after all tax and benefits have been taken into consideration).

The red line shows how this picture will be largely changed by the universal credit which will target benefits at people working fewer than 16 hours per week. This reform, which is largely sensible, is to be welcomed but will not be fully implemented until 2014 – four years after the coalition came to power.